Pound Australian Dollar Exchange Rate News: GBP/AUD Wavered on Dire UK Economic Growth Concerns

November 21, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar Exchange Rate News: GBP/AUD Wavered on Dire UK Economic Growth Concerns

Pound (GBP) Quiet as Concerns Grow of Economic Growth

The Pound (GBP) remained under pressure this morning amid a lack of major data. In the wake of Chancellor Jeremy Hunt outlining his autumn statement, experts are concerned with his growth plans.

Despite GBP investors buoyed by an apparent return to fiscal responsibility with a myriad of tax hikes and spending cuts. However, it also signalled a period of low growth, high taxation, and more concerning, a drastic fall in living standards. Tony Danker, CBI Director General, warned that people’s lives will become harder, without concrete plans for growth. Danker said:

‘The painful reality about growth is that it can’t be stimulated overnight. But growth is good. Growth is a precondition to a stable society. Without growth the NHS gets worse not better. People’s lives get worse not better. And we lack the resources we need to transform ourselves to a zero-carbon world.

‘Yet Britain’s had 15 years of low growth and flatlining productivity. We can’t afford a repeat.’

Compounding issues, The Office for Budget Responsibility (OBR) warned last week that the UK was already in a recession and is expected to last a year. GDP is predicted to shrink by 1.4% in 2023. The continuing squeeze on household incomes is likely to exacerbate the situation, and the Pound could remain under pressure for the foreseeable future.

Meanwhile, further weighing on Sterling is troubling news that restaurants are going bankrupt at a faster rate than during the Covid pandemic. A perfect storm of surging energy costs, falling bookings, and staff shortages are seeing closures rise by 60% in the past year. Rebecca Dacre, a partner at advisory firm Mazars, warned of the tough times ahead for restaurants:

‘The Christmas trading period is usually a bumper period for hospitality businesses. However, restaurants will be bracing themselves for a very tough winter and many face a real battle to keep afloat.

‘There’s a certainty of further insolvencies if they don’t receive much more support from the government, but the chances of the government fully turning on the taps is low.’

Australian Dollar (AUD) Muted amid Risk-Averse Market

Meanwhile, the Australian Dollar (AUD) struggled for demand on Monday morning as the market mood shifted to a more cautious stance.

Risk appetite was on the downside as concerning news out of China weighed on AUD investors. Optimism over China relaxing their strict Covid restrictions has all but dissipated after the world’s second largest economy recorded their first Covid-related death since May. Threats of further tightening of China’s zero-Covid policy could see more disruptions, potentially souring global growth.

GBP/AUD Exchange Rate Forecast: Downbeat Australian PMIs to Boost the Pound?

Looking ahead, the Pound Australian Dollar exchange rate could see further movement with the release of Australian flash PMI data. An expected downturn in both services and manufacturing could weigh on the ‘Aussie’.

Meanwhile, with a lack of major data could see the Pound trade on domestic issues and the market mood. A potential Swiss-style Brexit deal could bolster GBP investors amid rumours circulating of a soft re-entry into the single market.

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